We all love technology. From the shiniest new tablet computer to the genes that power your crops, we’re all benefiting every day. Of course, the companies that develop these technologies say they deserve to benefit too. They say that intellectual property rights — from patents and trademarks to plant breeders rights — are crucial to ensuring that they get their just rewards for making the investments and taking the risks necessary to develop these products.
But can this sort of protection go too far? Can intellectual property rights actually hamper innovation and adoption by making the technology too expensive or too exclusive, or by creating a sort of intellectual gridlock, where conflicting claims prevent assembling innovations into a really dramatic leap forward?
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If farmers need technical innovation, is more protection for the developers always the best way to ensure they get it? Or should farmers be calling for a more nuanced approach that gives better balance? We took this issue up with Viktoriya Galushko, an assistant professor of economics at the University of Regina who wrote the book — or more correctly a Phd thesis — on the topic and has been studying this question for years.
Country Guide:Does there have to be a tension between the property rights of inventors and the ability of farmers and others to adopt and adapt these technologies?
Viktoriya Galushko:Intellectual property has a unique feature that a lot of other property doesn’t have — it’s non-tangible. Once the knowledge is out there and unprotected by any rights, it’s really hard to exclude anyone from using it, which undermines the ability of innovators to extract rents.
At the same time, producing this knowledge can be very costly, both in money and time. It takes eight to 10 years to develop a new crop variety, for example, and the research and development process is very uncertain. There’s no guarantee that having invested millions of dollars, you will generate something valuable.
When developers make these investment decisions, they want a return on their investment. So in that way, intellectual property rights are important to ensure that innovators get rewarded for their work, which in turn builds ground for sustainable investment in R&D.
But intellectual property rights can also slow down adoption of new technologies. They grant a temporary monopoly, which implies that the developers can apply above marginal-cost pricing.
There can also be an effect on subsequent research, especially in a field like plant breeding, where future innovations are always made on the foundation of past innovation. Intellectual property rights can set up roadblocks to future innovation.
CG:So these rights can unintentionally hamper progress?
VG:There is a widespread belief that intellectual property rights work to encourage innovation, but they can actually have the opposite effect. Again, this is especially relevant for industries where research is very cumulative in nature, such as crop research and breeding.
In order to produce innovation, you may have to put together multiple pieces that are very often controlled by different and sometimes competing parties. For example, Pioneer Hi-Bred’s genetically engineered insect-resistant corn requires access to 38 different patents that are controlled by 16 separate patent holders.
You can imagine that if you were one of those patent holders you would like to extract as much as you could from a person who wanted to use your technology.
Now imagine that all 16 patent holders behave exactly the same way. If all of them overvalue their innovations and ask much more than you expect to get out of your innovation, you will decide not to proceed with your research idea at all.
Even if research is not stopped completely, these rights can easily significantly slow it down.
In my research where I looked at the canola-and wheat-breeding industries, the breeders revealed that they did suffer research delays. This was especially true for the canola industry, where a lot of research materials are in the hands of the private sector. One canola breeder, for example, said they had to negotiate over some piece of intellectual property for four years. Another breeder said they experienced a five-year delay.
More than half of the breeders we talked to in the canola industry reported cases when they had to cease their projects due to inability to obtain access to intellectual property.
Public research is very heavily affected because public researchers do not have deep pockets.
CG:So where do we stand in Canada right now?
VG:There are two types of protection. Non-GMO crops are protected by plant breeders’ rights legislation. Plant breeders rights have two exemptions. The farmers’ exemption allows for the use of farm-saved seed for subsequent reproduction, but not for something like selling seed to a neighbour. The breeders’ exemption means protected varieties can be used for research purposes without getting permission from the original owner. So, germplasm of non-GMO crops can be easily used in breeding programs.
It gets more complicated for GMO plants, which many people assume are protected by patent. They are not, because you can’t patent a plant in Canada.
However, you can patent a within-cell process (like insertion of a foreign gene) and this provides de facto protection for GMO plants. But that also means that the use of GMO germplasm — the genetic material breeders depend on — is also much trickier.
The Canadian patent law contains an experimental exemption but it’s very vaguely defined. So, to be on the safe side — and that’s the approach of many breeders we have talked to — it’s better not to use anything that is protected by patents without a permission of the patent holder.
In biotechnology there are a lot of conflicting patents and the major problem is that a lot of early patents had very broad claims and those claims were on enabling technology — essential parts of any breeding program. So, this created a lot of the problems that we’re seeing today.
However, this is starting to change. The U.S. Patent Office has already made a move to ensure that overly broad claims do not block subsequent research. Also, major universities are creating a sort of a club to make a common depository pool of enabling technologies.
CG:Patent holders say that they’ve gotten much better at licensing agreements, so access isn’t really an issue. Is that so?
VG:Well, I guess the research industry has realized that they can’t make breakthroughs if they block access to each other’s technologies.
A lot of cross-licensing agreements are emerging where firms open up access to their technologies in return for access to their competitors’ technologies. Also, public researchers have played the game long enough to realize that they also need to protect their own technologies so they can bring something to the table when they negotiate with the private industry.
If public institutions have something to use as a bargaining chip they can of course be more successful in negotiating licensing or cross-licensing agreements with the industry.
CG:How can we know if we have found the ‘sweet spot’ that rewards research and innovation while ensuring that there is widespread adoption of good technology?
VG:That’s a million-dollar question and I don’t even know how to answer it. I’d say no — there’s no way to know if you’ve found that ‘sweet spot’ because technologies and capabilities evolve over time.
Take four decades ago, when research in Canada was publicly dominated and it was the norm to release everything into the public domain. Everyone was happy and regulators thought that placing knowledge into the public domain was a great idea and worked well for everybody involved.
That all changed with the advent of biotechnology. Is having stronger intellectual property protection better than placing everything into the public domain? If we hadn’t had intellectual property rights, we would probably not have what is currently on the market. Or maybe we would? We don’t know — because we don’t observe the two parallel worlds, one with rights and one without.
CG:Farmers feel they are on the front lines in this debate. What does that mean for the industry generally, and farmers specifically?
VG:Well, it’s not only agriculture — it’s anything that employs biotechnology, including the biomedical industry. I guess agriculture is the focus because farmers used to grow their own seed and didn’t have to rely much on the industry for their seed supply. But it’s changing… generations of farmers have contributed to the development of our seed industry the way we see it today, and they should reap the benefits.
CG:Has the Canadian system achieved a good balance?
VG:It depends if you mean balanced in terms of benefits to farmers, or in terms of impact on subsequent research. In terms of impacts on subsequent research, it’s not balanced and this has been recognized by the research industry. So, there’s a movement towards more sharing through cross-licensing agreements or development of common technology pools.
Is it balanced in terms of farmers and innovators’ benefits? Again, it’s hard to answer. We looked at the difference between patents and PBRs and their impact on innovators and on farmers. What we found that patent protection is better than PBRs for both innovator and farmers if farmers are not able to reproduce the seed as efficiently as seed companies which would be the case if you look at a hybridized crop like canola.
If farmers are more efficient, for instance with an open-pollinated crop like wheat, then it’s better for both the innovator and farmers to have the technology protected by PBRs. Current Canadian legislation allows patent protection for transgenic plants but not for plants bred through traditional breeding techniques.
So, our theoretical model suggests that everybody would benefit more if canola were protected by patents and wheat were protected by PBRs, which is how the current IP protection system in Canada works. According to our theoretical model Canada has a well-balanced system. But that’s based on the theoretical model that has a number of simplifying assumptions.CG
